When it comes to FATCA (Foreign Account Tax Compliance Act), it is important that Green Card Holders/Legal Permanent Residents understand the basics of reporting Foreign Accounts, Income, Assets, and Investments to the IRS and U.S. Government
Namely, that even though a Green Card Holder is a Citizen of another country, they essentially have the same reporting requirement as a U.S. citizen. This means that they are required to report and disclosure their foreign accounts and offshore income on IRS form 8938 aka (FATCA Form 8938).
Why Do Green Card Holders have to Report under FATCA?
FATCA is a rule designed to reduce offshore tax evasion. In order to comply with FATCA an individual is required to file with the IRS (Form 8938) when they meet certain threshold requirements. The threshold requirements are based on whether the reporting individual resides in the United States or overseas, and/or whether the individual is Married Filing Joint (MFJ) or Single/mMarried Filing Separate (MFS).
It does not ask whether the individual is a US citizen or legal permanent resident – although if you reside overseas, the threshold requirements for having to file the form are much higher.
The reason why FATCA does not make any distinction between a U.S. Citizen or Legal Permanent Resident when it comes to reporting, is because Green Card Holders and U.S. Citizens both have the same tax and reporting requirements.
A Green Card Holder is considered a “permanent” resident. As a permanent resident, an individual receives almost all the same benefits as a US citizen does.
As such, the United States also requires an individual that is aGreen Card Holder to adhere to the same tax reporting requirements and responsibilities.
FATCA is Confusing
We understand that it can get very confusing. This is especially true for individuals who only have “foreign” accounts in their country of citizenship. For example: if David is originally from Hong Kong and still maintains foreign accounts in Hong Kong even though he is also a U.S.Green Card Holder/ Legal Permanent Resident – is it really fair for David to be penalized for not reporting the Hong Kong accounts as foreign accounts?
Of course not, and from David’s perspective the accounts in Hong Kong are not Foreign Accounts because that is where he is originally from — and where he still maintains citizenship.
Getting into IRS Tax and Reporting Compliance
The IRS takes offshore tax evasion and the failure to properly report and disclose foreign/offshore accounts and income very seriously. In fact, the IRS is authorized to penalize individuals significant amounts of money depending on the facts and circumstances surrounding their failure to comply.
In order to avoid the significant fines and penalties an individual may consider getting to compliance by submitting to one of the approved IRS Offshore Voluntary Disclosure options.
At Golding & Golding, we limit our entire practice to IRS offshore voluntary disclosure. A brief introduction to IRS Offshore Voluntary Disclosure is provided below:
IRS Voluntary Disclosure of Offshore Accounts
Tax law is very complex. There are many aspects that go into any particular tax calculation, including the legal status, marital status, business status and residence status of the taxpayer.
Golding & Golding: About Our International Tax Law Firm
Golding & Golding specializes exclusively in international tax, and specifically IRS offshore disclosure.
Contact our firm today for assistance.